I am a senior editor at Forbes, covering legal affairs, corporate finance, macroeconomics and the occasional sailing story. I was the Southwest Bureau manager for Forbes in Houston from 1999 to 2003, when I returned home to Connecticut for a Knight fellowship at Yale Law School. Before that I worked for Bloomberg Business News in Houston and the late, great Dallas Times Herald and Houston Post. While I am a Chartered Financial Analyst and have a year of law school under my belt, most of what I know about financial journalism, I learned in Texas.

The Supreme Court today rejected, on First Amendment grounds, the idea that government-employee unions can charge non-members for political activities, even if they refund the money later.

The Court, in an opinion by Justice Samuel Alito, held that employees can be required to pay dues in exchange for the benefits they get from collective bargaining, but can’t be forced to effectively lend money to the union for political activities they disagree with. It was a blow to the Service Employees International Union, which first tried to make the case moot by offering refunds, and then argued it would be too difficult to get the assent of non-members before launching a campaign to defeat legislation it considered a threat to its existence.

Seven of the judges joined in the final judgment in the case, although Justices Ruth Bader Ginsburg and Sonia Sotomayor said the majority went too far by ruling that government unions must use an “opt-in” system for collecting special assessments, instead of the traditional “opt-out” system where the onus is on non-members to tell the union they don’t want to pay.Justices Stephen Breyer and Elena Kagan dissented.

The ruling applies only to public-sector unions, presumably because they use the power of the government to compel all employees covered by a collective-bargaining agreement to pay dues.

The decision, coming a short time after Gov. Scott Walker survived a union-led recall campaign in Wisconsin, further undermines the power of public-sector unions.The Supreme Court has uneasily upheld laws that require government employees to pay the equivalent of union dues to cover the costs of collective bargaining and other benefits they receive, under the theory it helps maintain “labor peace” by discouraging free-riders. Alito, in this decision, called these “agency shop” policies an “anomaly” given the strong First Amendment right against compelled speech or membership in any organization.

Unions are supposed to separate out political expenses and give non-members a so-called “Hudson notice” explaining the split and giving them the opportunity to pay only the non-political share of expenses. In this case, SEIU passed a special assessment after the Hudson notice, charging employees a 25% dues increase for an emergency “Fight-Back Fund” to defeat Proposition 75, which would have limited public-sector union rights.

Several non-members sued, saying they were being compelled to give the union money for a political cause they disagreed with. The union offered to refund non-members the previous year’s percentage rate of political spending but they rejected that, saying the fund was clearly all for political purposes.

The court, in its decision, said it was unfair to require non-members to file lawsuits or take other action to avoid paying for speech they disagree with. There’s no balancing of the “right” of unions to collect dues against employees’ First Amendment rights, the court said, since unions have “no constitutional entitlement to the fees of nonmember-employees.”

Worse, in this case, Prop. 75 would have bolstered non-member rights by requiring their consent in future political spending. Thus the effect of the procedure was to force non-members “to subsidize a political effort designed to restrict their own rights.”

The most far-reaching effect of the decision may be the court’s requirement of an opt-in system for public-sector unions when they impose a special assessment or dues increase. The court seems to be carving out a special case for public-sector unions, perhaps because of the political power they have to elect politicians who will serve their interests and diminish the political power of employees who disagree with them.

Justice Breyer said the majority upset a well-established administrative method of apportioning costs that was fair to non-members because it was based on audited financials. The decision criticizes unions for sometimes including lobbying expenses in the charges to non-members, he noted, but that is allowed under California law. And it appears to let non-members off the hook for all special assessments, regardless of what they’re used for, including assessments for unexpectedly lengthy contract negotiations and the like.

Finally Breyer agreed with Ginsburg and Sotomayor that the majority was overreaching when it imposed an opt-in requirement on all special assessments.

There is no good reason for the Court suddenly to enter the debate, much less now to decide that the Constitution resolves it.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

Comments

This is an interesting and just ruling by the court. The next question, given the courts’ decision, is does a union have the right to compel employee’s of government and private sector unions to make political contributions.

“There’s no balancing of the “right” of unions to collect dues against employees’ First Amendment rights, the court said, since unions have “no constitutional entitlement to the fees of nonmember-employees.”

Do the unions have a constitutional right to force people into unions and pay dues they otherwise would not agree to, particularly for political purposes?

Rex K Smith President of Nova Pacific Realty Investments is a multi-national developer and investor in commercial, multi-family and industrial real estate.

Your headline is a bit over-dramatic. It has been true for 20 odd years that there can be no “closed shop” in which employees are required to be union members. The Hudson and Beck Supreme Court cases, in the public and private sectors respectively, establish that there is a First Amendment right of disassociation (non-membership); but that unions may charge a service fee for their activities which are non-political–negotiating and enforcing contracts, defending members and non-members alike in disciplinary matters, etc. To that end, unions are required to keep an accounting of their expenditures, and annually to inform service fee payers of the accounting, offering them a chance to challenge the percent of full dues which they are determined to pay according the the above calculation. All this case says is that that the annual schedule is insufficient for special assessments.